Comments on: BBC Column: auction psychology

By: Michael Woelk

Michael Woelk — Thu, 20 Sep 2012 08:46:00 +0000

I used to play the theme from Jaws while bidding on eBay. I’d time it so that the climax of the music would coincide with the end of the auction (I’d always bid in the last 30 seconds) – it made for a very exciting experience.

This was before they introduced the “Buy Now” feature though. Nowadays, I only buy rare and old things there since it became next to impossible to get a good a deal on new items.

By: amelie

amelie — Wed, 19 Sep 2012 16:42:26 +0000

Auctions have been around forever; are these motivations just cheery happenstance for sellers or do folks like Ebay study ways to make more money? Would ancient auctioneers have known about the persuasion techniques inherent in the practice?

By: joelmarsh

joelmarsh — Wed, 19 Sep 2012 12:43:06 +0000

Great post!

Robert Cialdini’s book is quite good, but it is not the best if you want to understand persuasive elements.

Full disclosure: I am about to recommend my own book.

I recently wrote a book call “The Composite Persuasion”, in which I compare over 40 types of persuaders to distill their common traits. Not as principles; as a predictable method.

The Endowment Effect is one of those self-reenforcing principles (of which this blog is normally more critical) that amounts to “just because”.

In my book I explain the common properties that our biological motivations have. One of which is their gain/loss mechanics. This correlates to Cialdini’s scarcity and social proof, but without having to “work the principle” to get all the details in place.

Our motivations (I name them in the book, not in principle, but specifically) are biologically built to maximize potential gain until loss outweighs the gain, *simultaneously*.

The timing, therefore is actually the key factor.

If you can delay the cost on a presently available gain, it’s a winner. It’s the classic “buy now, pay later” problem of credit.

Ebay doesn’t ask you to buy, they merely want a dollar value for how much you want it, with some chance of actually paying it in the future.

An auction is, therefore, a recipe for maximum motivation to buy, and subsequently the highest chance of Buyer’s Remorse while we wait for delivery (delayed gain, when cost has been incurred).

That ends up being a much more reliable explanation of the Endowment Effect than “we are imagining owning it so we value it more”.

Good luck explaining charity with the Endowment Effect.

I enjoy your blog very much! Keep it up!

My book on Amazon: http://amzn.to/zU4e1T

On iBooks: http://j.mp/Download-the-ebook-now

By: Angry Dude

Angry Dude — Wed, 19 Sep 2012 11:18:08 +0000

These psychological explanations for auction outcomes are indeed interesting. Can these outcomes also be explained by information theory?

If half of the outcomes are above the buy it now price, and the other half below then the buy it now price is a median price for the item. So, the auction outcomes are distributed evenly around the median, as might be expected.

Of course, the buy it now price is correlated with the median of the sales price dependently because the buy it now price is known a priori.